But the SPLC is rolling in an increasingly bizarre direction. For
example: why exactly is it piling up its extraordinary, illiquid, secretive,
never-touched money mountain? This kind of thing risks unfavorable IRS
attention. And why does it need a bank account in the
Cayman Islands?

Donations to the SPLC in the year ending October 31, 2009, were
down 11.1 percent—to a mere $28.8 million. But, because of a massive $32.49
million (19.6 percent) increase in the value of its securities portfolio, the
SPLC’s “Net Assets” rose to $199.95 million.

In contrast, according to one report, many charities faced
contractions in funds available of 20-30 percent over this period.

Operationally, things weren’t too bad for the SPLC either. Despite
fundraising expenses of $5.677 million, according to the 990, and despite
supporting 206 employees (payroll $12.312 million), the SPLC still managed to
transfer a remarkable $4 million (the same amount as last year) to its
reserves—its so-called “Endowment Fund.”

In contrast, many, probably most, foundations must have had to
invade their reserves in the arduous conditions of 2008-9.

With most charities, the term “Endowment Fund” would mean a pool
of funds to which access is restricted, perhaps to income or a small percentage
of assets.

This is not the case with the SPLC. Only a tiny proportion of its
assets are restricted. The nomenclature is just camouflage. As Dan Borochoff,
President of the watchdog American Institute of Philanthropies, told Bill
O’Reilly in 2001:

It’s not really an
endowment [just] because the board called it that.1

What this means: approximately 13.9 cents of every dollar that the
public gave to the SPLC in 2008-9 was promptly squirreled away into a
management-controlled hoard from which, on the available public record, it
neveremerges.

Difficult times did call for grave measures, however. The SPLC
apparently did not feel able to accept VDARE.com’s helpful suggestion of last
year that it make some donations (which it is quite entitled to do) to other
leftist 501(c)(3) charities less wealthy than itself—many of whom were
certainly suffering.

The SPLC also cut back its much-touted grants to school districts
to encourage them to accept the egregiously-misnamed
Teaching Tolerance anti-majority brainwashing
kits by a striking 44.6 percent, to $108,144—a miniscule 0.3 percent of the
Center’s receipts from the public in 2009.

And (in a step that no doubt grieved the hearts of the senior
management, given their actual priorities) the “unfunded commitments to
invest…in limited partnerships and LLC’s under capital commitment agreements”
referred to in Note 4 of both the 2008 and 2009 audited Financial Statements
fell by 15 percent, to $7.056 million.

This brought these “unfunded capital commitments” down to 86.6
percent of 2009’s “Legal Services” expense from 103.8 percent in 2008.

What is this curious “unfunded capital commitments” item? It
arises from the SPLC’s enthusiasm for putting its “Endowment Fund” booty in
highly sophisticated investment pools, rather than just in simple equities,
bonds, or (Heaven forbid!) deposit accounts. Generally, it is not uncommon for
these investment pools, for instance in the venture capital or real estate
fields, to get incoming investors to commit to a funding schedule as the
underlying projects get under way.

What does this tell us about the SPLC?

It tells us that in the last two years the Center was budgeting to
spend at least as much on arcane financial investments as it spent on its
eponymous legal activity. Or, to put it another way, of every $1 received from
the public in 2009, 28.3 cents was spent on legal services, while the “capital
commitment” for limited partnerships and LLCs at the end of the year equaled
24.5 cents.

As I said last year, the SPLC is in effect a modest public
interest law firm and fundraising operation, linked to a very large, wildly
aggressive investment pool. It’s really the
Southern Poverty Law and Investing
Center!

One wonders if the SPLC’s apparently very credulous donors realize
this.

Contemplating the “Endowment Fund” reveals a great deal about the
motives and outlook of the SPLC’s management.

In brief, they appear obsessed with manipulating money to make
money. This is particularly true in view of recent changes evident in the 2009
reports. The structure of the portfolio looks like it could belong to a retired
Goldman Sachs Partner, or possibly a very aggressive Family Office managing the
fortune of an ultra-rich clan. There can be very few legal charities with this
extraordinary appearance.

Usually one would expect that a charity with a large endowment
would be interested in income, liquidity, and perhaps a little
growth—interest-bearing instruments, bonds, possibly a moderate amount of
high-grade equities.

Not the SPLC!

As of October 31, 2009, of the SPLC’s total investment portfolio
of $197,902,331, only $48,772,162 (24.6 percent) was held in cash, interest
bearing instruments, Treasuries, or equities for which its accountants could
establish “active market” values.

The balance (75.4 percent) was in various types of “alternative
investments,” which needed less transparent valuation techniques. In 2008, only
49 percent of the portfolio was in such things.

What are these “alternative investments?” Note 4 in the Accounts
says

The Center’s endowment fund
investments include limited partnerships, limited liability companies, and
offshore corporations…. The Center’s alternative investments themselves have
interests in limited partnerships, U.S. and international public equities,
private equity fixed income, real estate and commodities….Because alternative
investments are not readily marketable, their estimated fair values are subject
to judgment and uncertainty….

On Wall Street, “alternative investments” got a bad name for
illiquidity in the disruptions of 2008-9. The accounting profession developed a
new way of valuing them.

The more transparent category (Level 2—“Inputs other than quoted
prices…fair value is determined through the models or other valuation
methodologies”) is used for $119.1 million of the total SPLC portfolio (60.1 percent).

Level 3 (“Inputs are unobservable…and include situations where
there is little, if any market activity…investments included in Level 3
include…alternative investments which are not redeemable…in the near term” is
used for a material $30.08 million (15.2 percent) of the total portfolio.

Some might question the SPLC having such a large proportion of its
reserves in illiquid (and presumably more risky) assets. It would certainly
look odd for a normally-motivated charity.

But this would be to misunderstand what seems to be the purpose of
these holdings in the SPLC’s case. There is no history and probably no
intention of
ever using these resources to sustain the Center’s operations. They
are there to make the SPLC richer. In this context, a strategy of swinging for
the fences makes sense.

Still, it has to be asked: why, in 2009, increase the proportion
of “alternative investments” by half—to 78 percent in the case of the
“Endowment Fund” narrowly defined? This was not a year in which this type of
investment was favored. If more market gearing was desired, more speculative
listed securities could easily have been used instead.

The VDARE.com hypothesis: privacy. As the SPLC increasingly moves
into smearing other 501 (c) (3) charities such as the patriotic immigration
reform groups, it can expect more attention to be paid to its peculiar
finances. (For one thing, everyone is jealous!) By burying its holdings in
these “alternative investment” entities, gains could be hidden for years,
instead of immediately showing up in market valuations.

This is analogous to the Center’s real estate holdings: gross book
value $25.3 million, $16.8 million after depreciation—but very likely worth far
more than net book. (Real estate usually is.)

Increasingly, what the $PLC is really worth will be known only to
insiders.

One matter for which VDARE.com does not have a hypothesis: the new
disclosure, on Page 5 of the latest 990, that the $PLC now has an account in
the notorious tax haven and money-laundering location of the Cayman Islands!
(The previous year the answer to this question was “N/A.”)

Why would a tax-exempt American charity need any involvement in
such a place? Appetite for exposure to a particular manager seems an
implausible reason. Even quite small hedge fund and other “alternative
investment” managers usually have look-alike onshore and investment offshore
pools, the latter to accommodate investors who are able to avoid possible U.S.
tax involvement. But the SPLC is tax-exempt.

At the very least, the Cayman Islands account demonstrates the
extraordinary scope of the SPLC’s investing activities.

The SPLC carries no less than 95.8 percent of its investment
assets in its piously misnamed “Endowment Fund.” The American Institute of
Philanthropies, which exists to rank the financial efficiency of charities, is
quite reasonably very hostile to excessive accumulation of reserves. It said in
the April/May edition of its
Charity Rating Guide:

AIP strongly believes that
your dollars are most urgently needed by charities that do not have large
reserves of available assets. AIP therefore reduces the grade of any group
which has available assets equal to
three to five years of operating
expenses. [emphasis
added]

The SPLC in 2009 had an investment portfolio equivalent to a
thumping 6.6 years of what its 990 calls “Total functional expenses.” So it
gets a resounding overall F grade from the AIP, in contrast to C- based on its
operating ratios alone. This has been the case for quite some years.

The lowest grade ranked by the AIP as “Satisfactory” is C-. The
only other politically oriented charity to get an F based on excessive assets
is President Carter’s Carter Center—which, however, was ranked A- on the basis
of operations. (The only patriotic immigration charity to be ranked was FAIR,
which got a B on operations—its endowment is apparently not large enough to
matter.)

The SPLC cannot claim unstable inflows as the reason for its
hoarding. In the last five years the “Gifts, grants, contributions…” category
has ranged between last year’s low of $28.8 million to the previous year’s high
of $32.4 million.

The SPLC appears to have an odd compensation structure. In 2009,
its 206 employees were paid an average of $59,765 (which is high: median
household income in Montgomery, Alabama is about $42,000; the cost of living is
77.4 percent of the U.S. average). But only two of its officers were paid
more than $300,000. Of the two SPLC enforcers with most public visibility, Mark
Potok is only 7thin compensation at $144,099. Poor Heidi Beirich
once again does not make the “Highest Compensated Employee” list.

Highest paid duo Richard Cohen (President/CEO: $345,490) and
founder and evil genius Morris Dees (Chief Trial Counsel: $348,420) occupy an
unusual shared compensation perch. If the two incomes are amalgamated to give
the high pinnacle structure more normal in U.S. charities and corporations, the
resultant $693,910 income would make its recipient 22nd highest paid Charity
Executive, according to the AIP’s latest
Charity Rating Guide—narrowly ahead of the
ADL’s Abe Foxman at $688,215.

How active can Morris Dees be at 74? Enough to need an unspecified
amount of Chartered Air transport, according to the 990, and to accidently
spend $2,144 from a corporate credit card on personal travel.

When reviewing the SPLC’s accounts last year, I suggested it might
have been expected that the moderate return/low risk strategy alleged by Ponzi
scheme operator Bernard Madoff might have attracted their investments. This is
especially so given the ethnicity of the SPLC’s funding, reported in a recent
Center For Immigration Studies backgrounder to be “anchored by wealthy Jewish
contributors on the East and West coasts.”

The Picower Foundation, set up by Jeffry Picower, reliably
reported to have been the biggest beneficiary of the Madoff scam,2
apparently gave the SPLC a total of $2.9 million.3

Picower was found dead in his Palm Beach swimming pool last fall.
His estate is reportedly about to settle with the court-appointed Madoff
trustee by returning at least $2 billion.4

Helpful suggestion: Madoff left many destitute elderly in his
wake. The SPLC should return its Picower money to the Madoff trustee for their
benefit. After all, it’s conventional for politicians to return tainted
campaign donations. (Suggest this to the Madoff trustee.)

So what is the SPLC’s mad scramble for enrichment all about?

Does the controlling clique at the Center one day intend to throw
off its mask, perhaps after Dees’ death, let fundraising wither, and draw out
massive salaries with minimal activity—a pattern not unknown in foundations
with inherited endowments? (My personal guess.)

Or must America continue to put up with its reckless and dishonest
allegations stinking up our public discourse in order to keep the SPLC trough
replenished? Are these people as crazy as they are mendacious?

The above
article is reproduced with permission from VDARE.COM.
To view the original posting visit: [here].